A real estate investment can be a great way to build wealth for both novice and experienced investors. Among other benefits, there are a wide variety of types of real estate in which to invest, creating opportunities for investors of all abilities and resources. Below are three common types of investments worth considering.
1. Residential Property
For many people, buying a house provides both a home and their most substantial investment. Buying residential property is generally considered a stable, long-term investment (provided you have the means to repay any loan) and a great way to build equity in the long-term.
For property investors, this may be doubly true. “Flipping” residental real estate is a great early way to invest. Houses in poor repair can often be purchased fairly cheaply — and on your own or with a team of professionals, can be improved and sold at a considerable profit.
Owning residential property for rent can also be a great way to build a reliable income stream, through leasing living space to tenants.
2. Commercial Real Estate
A commercial real estate purchase will typically be more expensive than a residential one, but can yield substantial benefits over time. Commercial properties also allow for reliable income from tenants, as commercial leases tend to have longer terms and less frequent turnover than residential leases. As an added benefit, commercial real estate also can serve as a valuable asset to be used as collateral in future loans.
Of course, with both residential and commercial properties, it’s important to consider the time and investment needed to serve as property manager. You will be responsible for any repairs or issues that arise with the property, and willingness to undertake this obligation is a prerequisite for responsible ownership.
3. Undeveloped Land
Though often overlooked, undeveloped land can often be a great investment, particularly for a first-time investor. Raw land may have unique timber or mineral value that comes with the property. (Of course, it’s important to ensure that a piece of property contains all mineral rights, which may sometimes be held by another owner.)
Raw land also has unique speculative value. It can appreciate dramatically in an up-and-coming region, or in an area that’s seeing widespread nearby development, where demand for land is growing.
In short, there are countless types of real estate investments available, for both new property owners and experienced ones. It’s a great idea to review different types of investments, determine what you’re seeking from a business perspective, and craft an effective plan for a property purchase.